UPDATE: Rosneft exec says Russia’s VTB not participant in privatization

(Rewrites headline, lede, adds details in second, third paragraphs)

MOSCOW, Jan 17 (PRIME) -- Russia’s second largest bank VTB has participated in the purchase by a consortium of Swiss commodity trader Glencore and the Qatar Investment Authority (QIA) of 19.5% in oil major Rosneft, but the bank did not participate in privatization, Rosneft’s press secretary Mikhail Leontyev told PRIME on Tuesday.

“VTB Bank participated in the deal, but it did not participate in privatization,” Leontyev said.

“The deal was carried out in full accordance with the tasks that were set before us. All tasks were fulfilled, but they were of different levels, and one of them was to avoid volatility at the currency market. The order that was published by participants of the deal is explained by the implementation of the goal.”

Vedomosti business daily reported citing documents of QHG Shares Limited – the consortium of QIA and Glencore – that VTB participated in privatization of 19.5% in Rosneft through provision of a 692 billion ruble, or a 10.2 billion euro loan to the consortium on December 15, 2016.

Singapore-based QHG Shares Limited took out the loan and pledged a stake in Rosneft as collateral, Vedomosti reported.

The stake was not disclosed, but the price of government’s 19.5% in Rosneft was set at 692 billion rubles, and the same amount plus 18 billion rubles of additional dividends were transferred to the budget on December 16 by state holding Rosneftegaz, the previous owner of the stake, the business daily reported.

But already on December 22, rights for claims under the loan and the collateral were transferred to Rosneftegaz, and on January 3, 2017, the consortium became the owner of the stake and Rosneftegaz lifted the pledge. Conditions of the VTB’s loan and the amount of money paid by Rosneftegaz for the rights were not disclosed. The documents only stipulated that VTB received an interest income of 25.4 million euros, Vedomosti said.

This means that VTB and Rosneftegaz became bridge creditors for Glencore and QIA. Initially Italy’s Intesa Sanpaolo were to provide the bulk of financing, but on December 19 a bank representative said that financing of the deal was still under consideration.

In the end, Intesa provided a 5.2 billion euro loan, QIA provided 2.5 billion euros, and Glencore provided 300 million euros. The remaining 2.2 billion euros plus interest on the debt to Rosneftegaz will be raised through loans from Glencore and QIA, the business daily reported citing documents.

But in February 2016, President Vladimir Putin said that future investors should use their own resources or borrow from private banks to finance privatization deals. A government official said that participation of VTB does not contradict the order as the bank only provided short-term liquidity so that the deal is finished until the end of the year, and rights for claims were reassigned as soon as possible.

QIA could not be reached for comment, Glencore, Intesa and VTB declined to comment. A Rosneft representative said that the deal’s goals were fulfilled, and such a structure was necessary in order to avoid volatility on the currency market.

(59.6067 rubles – U.S. $1)

End